The Ninth Circuit's ruling in Laster v. AT&T Mobility [48 CR 1113], which held that the class action waiver in the AT&T wireless service agreement's arbitration clause was unconscionable and unenforceable under California law, is reversed. The Ninth Circuit based its ruling on the California Supreme Court's finding in Discover Bank
v. Superior Court that most collective-arbitration waivers in consumer contracts are unconscionable, but that finding is preempted by Section 2 of the Federal Arbitration Act (FAA). Section 2 reflects a federal policy favoring arbitration, and its principal purpose to ensure that private arbitration agreements are enforced according to their terms. While Section 2 has a savings clause that permits arbitration agreements to be invalidated by generally applicable contract defenses such as unconscionability, nothing in that savings clause suggests an intent to preserve state law rules that stand as an obstacle to the accomplishment of the FAA's objectives. The Discover Bank holding allows any party to a consumer contract to demand classwide arbitration ex post. To the extent that class arbitration is not consensual, it is inconsistent with the FAA. Therefore, California's Discover Bank rule is preempted by the FAA, and the Ninth Circuit's ruling is reversed and remanded for further proceedings consistent with this opinion.

The Court held 5-4 that a state law requiring the availability of classwide arbitration interferes with the "fundamental attributes of arbitration" and creates a scheme inconsistent with the Federal Arbitration Act. The ruling is a big win for corporations seeking to resolve consumer and employee disputes by way of bilateral arbitration.

The cellular telephone contract between respondents (Concepcions)
and petitioner (AT&T) provided for arbitration of all disputes, but
did not permit classwide arbitration. After the Concepcions were
charged sales tax on the retail value of phones provided free under
their service contract, they sued AT&T in
a California Federal District Court. Their suit was consolidated
with a class action alleging, inter alia, that AT&T had engaged
in false advertising and fraud by charging sales tax on "free"
phones. The District Court denied AT&T's motion to compel
arbitration under the Concepcions' contract. Relying on
the California Supreme Court's Discover Bank decision, it found
the arbitration provision unconscionable because it disallowed
classwide proceedings. The Ninth Circuit agreed that the provision
was unconscionable under California law and held that the Federal
Arbitration Act (FAA), which makes arbitration agreements "valid,
irrevocable, and enforceable, save upon such grounds as exist at law
or in equity for the revocation of any contract,"
9 U.S.C. § 2, did not preempt its ruling.

Held: Because it "stands as an obstacle to the accomplishment
and execution of the full purposes and objectives of Congress,"
Hines v. Davidowitz, 312 U. S. 52, 67, California's
Discover Bank rule is preempted by the FAA. Pp. 4-18.

(b) In Discover Bank, the California Supreme Court held
that class waivers in consumer arbitration agreements are
unconscionable if the agreement is in an adhesion contract, disputes
between the parties are likely to involve small amounts of damages,
and the party with inferior bargaining power alleges a deliberate
scheme to defraud. Pp. 5-6.

(c) The Concepcions claim that the Discover Bank rule is a
ground that "exist[s] at law or in equity for the revocation of any
contract" under FAA § 2. When state law prohibits outright the
arbitration of a particular type of claim, the FAA displaces the
conflicting rule. But the inquiry is more complex when a generally
applicable doctrine is alleged to have been applied in a fashion
that disfavors or interferes with arbitration. Although § 2's saving
clause [***2] preserves generally applicable contract defenses, it does not
suggest an intent to preserve state-law rules that stand as an
obstacle to the accomplishment of the FAA's
objectives. Cf. Geier v. American Honda Motor Co.,
529 U. S. 861, 872. The FAA's overarching purpose is to ensure the
enforcement of arbitration agreements according to their terms so as
to facilitate informal, streamlined proceedings. Parties may agree
to limit the issues subject to arbitration, Mitsubishi MotorsCorp. v. Soler Chrysler-Plymouth, Inc.,
473 U. S. 614, 628, to arbitrate according to specific rules,
Volt, supra, at 479, and to limit with whom they will
arbitrate, Stolt-Nielsen, supra, at ___. Pp. 6-12.

(d) Class arbitration, to the extent it is manufactured by
Discover Bank rather than consensual, interferes with
fundamental attributes of arbitration. The switch from bilateral to
class arbitration sacrifices arbitration's informality and makes the
process slower, more costly, and more likely to generate procedural
morass than final judgment. And class arbitration greatly increases
risks to defendants. The absence of multilayered review makes it
more likely that errors will go uncorrected. That risk of error
may become unacceptable when damages allegedly owed to thousands of
claimants are aggregated and decided at once. Arbitration is poorly
suited to these higher stakes. In litigation, a defendant may appeal
a certification decision and a final judgment, but
9 U.S.C. § 10 limits the grounds on which courts can vacate
arbitral awards. Pp. 12-18.

Section 2 of the Federal Arbitration Act (FAA) makes agreements to
arbitrate "valid, irrevocable, and enforceable, save upon such
grounds as exist at law or in equity for the revocation of any
contract." 9 U.S.C. § 2. We consider whether the FAA prohibits
States from conditioning the enforceability of certain arbitration
agreements on the availability of classwide arbitration procedures.

I

In February 2002, Vincent and Liza Concepcion entered into an
agreement for the sale and servicing of cellular telephones
with AT&T Mobility LCC (AT&T).[fn1] The contract provided for
arbitration of all disputes between the parties, but required
that claims be brought in the parties' "individual capacity, and not
as a plaintiff or class member in any purported class or
representative proceeding." App.
to Pet. for Cert 61a.[fn2] The agreement authorized AT&T to make
unilateral amendments, which it did to the arbitration provision on
several occasions. The version at issue in this case reflects
revisions made in December 2006, which the parties agree are
controlling.

The revised agreement provides that customers may initiate dispute
proceedings by completing a one-page Notice of Dispute form
available on AT&T's Web site. AT&T may then offer to settle the
claim; if it does not, or if the dispute is not resolved [***3] within
30 days, the customer may invoke arbitration by filing a separate
Demand for Arbitration, also available on AT&T's Web site. In the
event the parties proceed to arbitration, the agreement specifies
that AT&T must pay all costs for nonfrivolous claims;
that arbitration must take place in the county in which the customer
is billed; that, for claims of $10,000 or less, the customer
may choose whether the arbitration proceeds in person, by telephone,
or based only on submissions; that either party may bring a claim in
small claims court in lieu of arbitration; and that the arbitrator
may award any form of individual relief, including injunctions and
presumably punitive damages. The agreement, moreover,
denies AT&T any ability to seek reimbursement of its attorney's
fees, and, in the event that a customer receives an arbitration
award greater than AT&T's last written settlement offer,
requires AT&T to pay a $7,500 minimum recovery and twice the amount
of the claimant's attorney's fees.[fn3]

The Concepcions purchased AT&T service, which was advertised as
including the provision of free phones; they
were not charged for the phones, but they were charged $30.22 in
sales tax based on the phones' retail value. In March 2006, the
Concepcions filed a complaint against AT&T in the
United States District Court for the [**750] Southern District of
California. The complaint was later consolidated with a putative
class action alleging, among other things, that AT&T had engaged in
false advertising and fraud by charging sales tax on phones it
advertised as free.

In March 2008, AT&T moved to compel arbitration under the terms of
its contract [*1745] with the Concepcions. The Concepcions opposed the
motion, contending that the arbitration agreement was unconscionable
and unlawfully exculpatory under California law because it
disallowed classwide procedures. The District Court
denied AT&T's motion. It described AT&T's arbitration agreement
favorably, noting, for example, that the informal dispute-resolution
process was "quick, easy to use" and likely to "promp[t] full or
. . . even excess payment to the customer without the need to
arbitrate or litigate"; that the $7,500 premium functioned as "a
substantial inducement for the consumer to pursue the claim in
arbitration" if a dispute was not resolved informally; and
that consumers who were members of a class would likely be worse
off. Laster v. T-Mobile USA, Inc.,
2008 WL 5216255, *11-*12 (SD Cal., Aug. 11, 2008). Nevertheless,
relying on the California Supreme Court's decision in DiscoverBank v. Superior Court,
36 Cal. 4th 148, 113 P. 3d 1100 (2005), the court found that the
arbitration provision was unconscionable because AT&T had not shown
that bilateral arbitration adequately substituted for the deterrent
effects of class actions. Laster, 2008 WL 5216255, *14.

The Ninth Circuit affirmed, also finding the provision
unconscionable under California law as announced in DiscoverBank. Laster v. AT&T Mobility LLC,
584 F. 3d 849, 855 (2009). It also held that the DiscoverBank rule was not preempted by the FAA because that rule was
simply "a refinement of the unconscionability analysis applicable to
contracts generally [***4] in California." 584 F. 3d, at 857. In response
to AT&T's argument that the Concepcions' interpretation of
California law discriminated against arbitration, the Ninth Circuit
rejected the contention that "`class proceedings will reduce the
efficiency and expeditiousness of arbitration'" and noted
that "`Discover Bank placed arbitration agreements with class
action waivers on the exact same footing as contracts that bar
class action litigation outside the context of arbitration.'"
Id., at 858 (quoting Shroyer v. New Cingular WirelessServices, Inc., 498 F. 3d 976, 990 (CA9 2007)).

"A written provision in any maritime
transaction or a contract evidencing a
transaction involving commerce to settle by
arbitration a controversy thereafter arising out
of such contract or transaction . . . shall be
valid, irrevocable, and enforceable, save upon
such grounds [**751] as exist at law or in equity for the
revocation of any contract." 9 U.S.C. § 2.

We have described this provision as reflecting both a "liberal
federal policy favoring arbitration," Moses H. Cone,
supra, at 24, and the "fundamental principle that arbitration
is a matter of contract," Rent-A-Center, West, Inc. v.
Jackson, 561 U. S. ____, ____ (2010) (slip op., at 3). In line
with these principles, courts must place arbitration
agreements on an equal footing with other contracts, Buckeye CheckCashing, Inc. v. Cardegna, 546 U. S. 440, 443 (2006), and
enforce them according to their terms, Volt Information Sciences,Inc. v. Board of Trustees of Leland Stanford Junior Univ.[*1746],
489 U. S. 468, 478 (1989).

The final phrase of § 2, however, permits arbitration agreements
to be declared unenforceable "upon such grounds as exist at law or
in equity for the revocation of any contract." This saving clause
permits agreements to arbitrate to be invalidated by "generally
applicable contract defenses, such as fraud, duress, or
unconscionability," but not by defenses that apply only to
arbitration or that derive their meaning from the fact that an
agreement to arbitrate is at issue. Doctor's Associates,
Inc. v. Casarotto, 517 U. S. 681, 687 (1996); see also
Perry v. Thomas, 482 U. S. 483, 492-493, n. 9 (1987). The
question in this case is whether § 2 preempts
California's rule classifying most collective-arbitration waivers in
consumer contracts as unconscionable. We refer to this rule as the
Discover Bank rule.

Under California law, courts may refuse to enforce any contract
found "to have been unconscionable at the time it was made," or
may "limit the application of any unconscionable clause."
Cal. Civ. Code Ann. § 1670.5(a) (West 1985). A finding of
unconscionability requires "a `procedural' and a `substantive'
element, the former focusing on `oppression' or `surprise' due to
unequal bargaining power, the latter on `overly harsh' or
`one-sided' results." Armendariz v. Foundation HealthPyschcare Servs., Inc.,
24 Cal. 4th 83, 114, 6 P. 3d 669, 690 (2000); accord, DiscoverBank, 36 Cal. 4th, at 159-161, 113 P. 3d, at 1108.

In Discover Bank, the California Supreme Court applied this
[***5] framework to class-action waivers in arbitration agreements and held
as follows:

"[W]hen the waiver is found in a consumer
contract of
adhesion in a setting in which disputes between
the contracting parties predictably involve small
amounts of damages, and when it is alleged
that the party with the superior bargaining power
has carried out a scheme to deliberately
cheat large numbers of consumers out of
individually small sums of money, then . . . the
waiver becomes in practice the exemption of the
party `from responsibility for [its] own fraud,
or willful injury to the person or property of
another.' Under these circumstances, such waivers
are unconscionable under California law and
should not be enforced."
Id., at 162, 113 P. 3d, at 1110 (quoting Cal. Civ. Code Ann. § 1668).

The Concepcions argue that the Discover Bank rule, given its
origins in California's unconscionability doctrine and California's
policy against exculpation, is a ground that "exist[s] at law or in
equity for the revocation of any contract" under FAA § 2. Moreover,
they argue that even if we construe the Discover Bank rule as a
prohibition on collective-action waivers rather than simply an
application of unconscionability, the rule would still be applicable
to all dispute-resolution contracts, since California prohibits
waivers of class litigation as well. See America Online, Inc.
v. Superior Ct.[*1747],
90 Cal. App. 4th 1, 17-18, 108 Cal. Rptr. 2d 699, 711-713 (2001).

When state law prohibits outright the arbitration of a
particular type of claim, the analysis is straightforward: The
conflicting rule is displaced by the FAA. Preston v.
Ferrer, 552 U. S. 346, 353 (2008). But the inquiry becomes more
complex when a doctrine normally thought to be generally applicable,
such as duress or, as relevant here, unconscionability, is alleged
to have been applied in a fashion that disfavors arbitration. In
Perry v. Thomas, 482 U. S. 483 (1987), for example, we
noted that the FAA's preemptive effect might extend even to grounds
traditionally thought to exist "`at law or in equity for the
revocation of any contract.'"
Id., at 492, n. 9 (emphasis deleted). We said that a court
may not "rely on the uniqueness of an agreement to arbitrate as a
basis for a state-law holding that enforcement would be
unconscionable, for this would enable the court to effect what . . .
the state legislature cannot." Id., at 493, n. 9.

An obvious illustration of this point would be a case finding
unconscionable or unenforceable as against public policy consumer
arbitration agreements that fail to provide for judicially monitored
discovery. The rationalizations for such a holding are neither
difficult to imagine nor different in kind from those articulated in
Discover Bank. A court might reason that no consumer would
knowingly waive his right to full discovery, as this would enable
companies to hide their wrongdoing. Or the court might simply say
that such agreements are exculpatory — restricting discovery would
be of greater benefit to the company [***6] than the consumer, since the
former is more likely to be sued than to sue. See DiscoverBank,
supra, at 161, 113 P. 3d, at 1109
(arguing that class waivers are similarly one-sided).
And, the reasoning would continue, because such a rule applies the
general principle of unconscionability or public-policy disapproval
of exculpatory agreements, it is applicable to "any" contract and
thus preserved by § 2 of the FAA. In practice, of course,
the rule would have a disproportionate impact on arbitration
agreements; but it would presumably apply to contracts purporting to
restrict discovery in litigation as well.

Other examples are easy to imagine. The same argument might apply
to a rule classifying as unconscionable [**753] arbitration agreements
that fail to abide by the Federal Rules of Evidence, or
that disallow an ultimate disposition by a jury (perhaps termed "a
panel of twelve lay arbitrators" to help avoid preemption). Such
examples are not fanciful, since the judicial hostility towards
arbitration that prompted the FAA had manifested itself in "a
great variety" of "devices and formulas" declaring arbitration
against public policy. Robert Lawrence Co. v. DevonshireFabrics, Inc., 271 F. 2d 402, 406 (CA2 1959). And although these
statistics are not definitive, it is worth noting that California's
courts have been more likely to hold contracts to arbitrate
unconscionable than other contracts. Broome, An Unconscionable
Applicable of the Unconscionability Doctrine: How
the California Courts are Circumventing the Federal Arbitration Act,
3 Hastings Bus. L. J. 39, 54, 66 (2006); Randall, Judicial Attitudes
Toward Arbitration and the Resurgence of Unconscionability,
52 Buffalo L. Rev. 185, 186-187 (2004).

The Concepcions suggest that all this is just a parade of
horribles, and no genuine worry. "Rules aimed at destroying
arbitration" or "demanding procedures incompatible with
arbitration," they concede, "[*1748] would be preempted by the FAA because
they cannot sensibly be reconciled with Section 2." Brief for
Respondents 32. The "grounds" available under § 2's saving clause,
they admit, "should not be construed to include a State's mere
preference for procedures that are incompatible with arbitration and
`would wholly eviscerate arbitration agreements.'"
Id., at 33 (quoting Carter v. SSC Odin Operating Co.,LLC, 237 Ill. 2d 30, 50, 927 N. E. 2d 1207, 1220 (2010)).[fn4]

We differ with the Concepcions only in the application of this
analysis to the matter before us. We do [***7] not agree
that rules requiring judicially monitored discovery or adherence to
the Federal Rules of Evidence are "a far cry from this case." Brief
for Respondents 32. The overarching purpose of the FAA, evident in
the text of §§ 2, 3, and 4, is to ensure the enforcement [**754] of
arbitration agreements according to their terms so as to facilitate
streamlined proceedings. Requiring the availability of classwide
arbitration interferes with fundamental attributes of arbitration
and thus creates a scheme inconsistent with the FAA.

B

The "principal purpose" of the FAA is to "ensur[e] that private
arbitration agreements are enforced according to
their terms." Volt, 489 U. S., at 478; see also
Stolt-Nielsen S. A. v. AnimalFeeds Int'l Corp.,
559 U. S. ___, ___ (2010) (slip op., at 17). This purpose is readily
apparent from the FAA's text. Section 2 makes arbitration agreements
"valid, irrevocable, and enforceable" as written (subject, of
course, to the saving clause); § 3 requires courts to stay
litigation of arbitral claims pending arbitration of those claims
"in accordance with the terms of the agreement";
and § 4 requires courts to compel arbitration "in accordance with
the terms of the agreement" upon the motion of either party to the
agreement (assuming that the "making of the arbitration agreement or
the failure . . . to perform the same" is not at issue). In light of
these provisions, we have held that parties may agree to limit the
issues subject to arbitration, Mitsubishi Motors Corp. v.
Soler Chrysler-Plymouth, Inc., 473 U. S. 614, 628 (1985), [*1749] to
arbitrate according to specific rules, Volt,
supra, at 479, and to limit with whom a party will
arbitrate its disputes, Stolt-Nielsen,
supra, at ___ (slip op., at 19).

The point of affording parties discretion in designing arbitration
processes is to allow for efficient, streamlined procedures tailored
to the type of dispute. It can be specified, for example, that the
decisionmaker be a specialist in the relevant field, or
that proceedings be kept confidential to protect trade secrets. And
the informality of arbitral proceedings is itself desirable,
reducing the cost and increasing the speed of dispute resolution.
14 Penn Plaza LLC v. Pyett,
556 U. S. ___, ___ (2009) (slip op., at 20); Mitsubishi MotorsCorp., supra, at 628.

The dissent quotes Dean Witter Reynolds Inc. v.
Byrd, 470 U. S. 213, 219 (1985), as "`reject[ing] the
suggestion that the overriding goal of the Arbitration Act was to
promote the expeditious resolution of claims.'"
Post, at 4 (opinion of BREYER, J.). That is greatly misleading.
After saying (accurately enough) that "the overriding goal of the
Arbitration Act was [not] to promote the expeditious resolution
of claims," but to "ensure judicial enforcement of privately made
agreements to arbitrate," 470 U. S., at 219, Dean Witter went
on to explain: "This is not to say that Congress was blind to the
potential benefit of the legislation for expedited resolution of
disputes. Far from it. . . ." Id., at 220. It then quotes a
House Report saying that "the costliness and delays of litigation
. . . can be largely eliminated by agreements for arbitration."
Ibid. (quoting H. R. Rep. No. 96, 68th Cong., 1st
Sess., 2 (1924)). The concluding paragraph of this part of its
discussion begins as follows:

"We therefore are not persuaded [***8] by the argument
that the conflict between two goals of the
Arbitration [**755] Act — enforcement of private
agreements and encouragement of efficient and
speedy dispute resolution — must be resolved in
favor of the latter in order to realize the
intent of the drafters." 470 U. S., at 221.

In the present case, of course, those "two goals" do not
conflict — and it is the dissent's view that would frustrate
both of them.

Contrary to the dissent's view, our cases place it beyond dispute
that the FAA was designed to promote arbitration. They have
repeatedly described the Act as "embod[ying] [a] national policy
favoring arbitration," Buckeye Check Cashing,
546 U. S., at 443, and "a liberal federal policy favoring arbitration
agreements, notwithstanding any state substantive or procedural
policies to the contrary," Moses H. Cone, 460 U. S., at 24; see
also Hall Street Assocs., 552 U. S., at 581. Thus, in
Preston v. Ferrer, holding preempted a
state-law rule requiring exhaustion of administrative remedies
before arbitration, we said: "A prime objective of an agreement to
arbitrate is to achieve `streamlined proceedings and expeditious
results,'" which objective would be "frustrated" by requiring a
dispute to be heard by an agency first. 552 U. S., at 357-358. That
rule, we said, would "at the least, hinder speedy resolution of the
controversy." Id., at 358.[fn5]

[*1750] California's Discover Bank rule similarly interferes with
arbitration. Although the rule does not require classwide
arbitration, it allows any party to a consumer contract to demand it
ex post. The rule is limited to adhesion contracts,
Discover Bank, 36 Cal. 4th, at 162-163, 113 P. 3d, at 1110, but
the times in which consumer contracts were anything other than
adhesive are long past.[fn6]Carbajal v. H&R Block TaxServs., Inc., 372 F. 3d 903, 906 (CA7 2004); see also
Hill v. Gateway 2000, Inc.,
105 F. 3d 1147, 1149 (CA7 1997). The rule also requires that damages
be predictably small, and that the consumer allege a scheme to
cheat consumers. Discover Bank,
supra, at 162-163, 113 P. 3d, at 1110. The former requirement,
however, is
toothless and malleable (the [**756] Ninth Circuit has held that damages of
$4,000 are sufficiently small, see Oestreicher v. AlienwareCorp., 322 Fed. Appx. 489, 492 (2009) (unpublished)), and the
latter has no limiting effect, as all that is required is an
allegation. Consumers remain free to bring and resolve their
disputes on a bilateral basis under Discover Bank, and some
may well do so; but there is little incentive for lawyers to
arbitrate on behalf of individuals when they may do so for a class
and reap far higher fees in the process. And faced with inevitable
class arbitration, companies would have less incentive to continue
resolving potentially duplicative claims on an individual basis.

Although we have had little occasion to examine class-wide
arbitration, our decision in Stolt-Nielsen is instructive. In
that case we held that an arbitration panel exceeded its power
under § 10(a)(4) of the FAA by imposing class procedures based on
policy judgments rather than the arbitration agreement itself or
some background principle of contract law that would affect its
interpretation. 559 U. S., at ___ (slip op., at 20-23). We then held
that the agreement at issue, which was silent on the question of
class procedures, could not be interpreted to allow them because [***9] the
"changes brought about by the shift from bilateral arbitration to
class-action arbitration" are "fundamental."
Id., at ___ (slip op., at 22). This is obvious as a structural
matter: Classwide arbitration includes absent parties, necessitating
additional and different procedures and involving higher stakes.
Confidentiality becomes more difficult. And while it is
theoretically possible to select an arbitrator with some expertise
relevant to the class-certification question, arbitrators are not
generally knowledgeable in the often-dominant procedural aspects of
certification, such as the protection of absent parties. The
conclusion follows that [*1751] class arbitration, to the extent it is
manufactured by Discover Bank rather than consensual, is
inconsistent with the FAA.

First, the switch from bilateral to class arbitration sacrifices
the principal advantage of arbitration — its
in-formality — and makes the process slower, more costly, and more
likely to generate procedural morass than final judgment. "In
bilateral arbitration, parties forgo the procedural rigor and
appellate review of the courts in order to realize the benefits of
private dispute resolution: lower costs, greater efficiency and
speed, and the ability to choose expert adjudicators to resolve
specialized disputes." 559 U. S., at ___ (slip op., at 21). But
before an arbitrator may decide the merits of a claim in classwide
procedures, he must first decide, for example, whether the class
itself may be certified, whether the named parties are sufficiently
representative and typical, and how discovery for the class should
be conducted. A cursory comparison of bilateral and class
arbitration illustrates the difference. According to the American
Arbitration Association (AAA), the average consumer arbitration
between January and August 2007 resulted in a disposition on the
merits in six months, four months if the arbitration was conducted
by documents only. AAA, Analysis of the AAA's Consumer Arbitration
Caseload, online at http://www.adr.org/ si.asp?id=5027 (all Internet
materials as visited Apr. 25, 2011, and available in Clerk of
Court's case file). As of September 2009, the [**757] AAA had opened
283 class arbitrations. Of those, 121 remained active, and 162 had
been settled, withdrawn, or dismissed. Not a single one, however,
had resulted in a final award on the merits. Brief for AAA as
Amicus Curiae in Stolt-Nielsen,
O. T. 2009, No. 08-1198, pp. 22-24. For those cases
that were no longer active, the median time from filing to
settlement, withdrawal, or dismissal — not judgment on the
merits — was 583 days, and the mean was 630 days.
Id., at 24.[fn7]

Second, class arbitration requires procedural formality. The
AAA's rules governing class arbitrations mimic the Federal Rules of
Civil Procedure for class litigation. Compare AAA,
Supplementary Rules for Class Arbitrations (effective Oct. 8, 2003),
online at http://www.adr.org/ sp.asp?id=21936, with
Fed. Rule Civ. Proc. 23. And while parties can alter those
procedures by contract, an alternative is not obvious. If procedures
are too informal, absent class members would not be bound [***10] by the
arbitration. For a class-action money judgment to bind absentees in
litigation, class representatives must at all times adequately
represent absent class members, and absent members must be afforded
notice, an opportunity to be heard, and a right to opt out of the
class. Phillips Petroleum Co. v. Shutts,
472 U. S. 797, 811-812 (1985). At least this amount of process would
presumably be required for absent parties to be bound by the results
of arbitration.

We find it unlikely that in passing the FAA Congress meant to
leave the disposition of these procedural requirements to an
arbitrator. Indeed, class arbitration was not even envisioned by
Congress when it passed the FAA in 1925; as the California Supreme
Court admitted in Discover Bank, class arbitration is a
"relatively recent development."
36 Cal. 4th, at 163, 113 P. 3d, at 1110. And it [*1752] is at the very
least odd to think that an arbitrator would be entrusted with
ensuring that third parties' due process rights are satisfied.

Third, class arbitration greatly increases risks to defendants.
Informal procedures do of course have a cost: The absence of
multilayered review makes it more likely that errors will go
uncorrected. Defendants are willing to accept the costs of these
errors in arbitration, since their
impact is limited to the size of individual disputes, and presumably
outweighed by savings from avoiding the courts. But when damages
allegedly owed to tens of thousands of potential claimants are
aggregated and decided at once, the risk of an error will often
become unacceptable. Faced with even a small chance of a devastating
loss, defendants will be pressured into settling questionable
claims. Other courts have noted the risk of "in terrorem"
settlements that class actions entail, see, e.g.,
Kohen v. Pacific Inv. Management Co. LLC,
571 F. 3d 672, 677-678 (CA7 2009), and class arbitration would
be no different.

Arbitration is poorly suited to the higher stakes of class
litigation. In litigation, a defendant may appeal a certification
decision on an interlocutory basis and, if unsuccessful, may appeal
from a final judgment as [**758] well. Questions of law are reviewed denovo and questions of fact for clear error. In contrast,
9 U.S.C. § 10 allows a court to vacate an arbitral award
only where the award "was procured by corruption, fraud, or
undue means"; "there was evident partiality or corruption in the
arbitrators"; "the arbitrators were guilty of misconduct in refusing
to postpone the hearing . . . or in refusing to hear evidence
pertinent and material to the controversy[,] or of any other
misbehavior by which the rights of any party have been prejudiced";
or if the "arbitrators exceeded their powers, or so imperfectly
executed them that a mutual, final, and definite award . . . was not
made." The AAA rules do authorize judicial review of certification
decisions, but this review is unlikely to have much effect given
these limitations; review under § 10 focuses on misconduct rather
than mistake. And parties may not contractually expand the grounds
or nature of judicial review. Hall Street Assocs.,
552 U. S., at 578. We find it hard to believe that defendants would bet the
company with no effective [***11] means of review, and even harder to
believe that Congress would have intended to
allow state courts to force such a decision.[fn8]

The Concepcions contend that because parties may and sometimes do
agree to aggregation, class procedures are not necessarily
incompatible with arbitration. But the same could be said about
procedures that the Concepcions admit States may not superimpose on
arbitration: Parties could agree to arbitrate pursuant to the
Federal Rules of Civil Procedure, or pursuant to a discovery process
rivaling that in litigation. Arbitration is a matter of contract,
and the FAA requires courts to honor parties' expectations.
Rent-A-Center[*1753], West, 561 U. S., at ___ (slip op., at 3).
But what the parties in the aforementioned examples would have
agreed to is not arbitration as envisioned by the FAA, lacks its
benefits, and therefore may not be required by state law.

The dissent claims that class proceedings are necessary to
prosecute small-dollar claims that might otherwise slip through the
legal system. See post, at 9. But States cannot require a
procedure that is inconsistent with the FAA, even if it is desirable
for unrelated reasons. Moreover, the claim here was most unlikely to
go unresolved. As noted earlier, the arbitration agreement provides
that AT&T will pay claimants a minimum of $7,500 and twice
their attorney's fees if they obtain an arbitration award greater
than AT&T's last settlement offer. The District Court
found this scheme sufficient to provide incentive for the individual
prosecution of meritorious claims that are not immediately settled,
and the Ninth Circuit admitted that aggrieved customers who filed
claims [**759] would be "essentially guarantee[d]" to be made whole,
584 F. 3d, at 856, n. 9. Indeed, the District Court concluded
that the Concepcions were better off under their arbitration
agreement with AT&T than they would have been as participants in a
class action, which "could take months, if not years, and which
may merely yield an opportunity to submit a claim for recovery of a
small percentage of a few dollars." Laster,
2008 WL 5216255, at *12.

***

Because it "stands as an obstacle to the accomplishment and
execution of the full purposes and objectives of Congress,"
Hines v. Davidowitz, 312 U. S. 52, 67 (1941), California's
Discover Bank rule is preempted by the FAA. The judgment of the
Ninth Circuit is reversed, and the case is remanded for further
proceedings consistent with this opinion.

[fn2] That provision further states that "the arbitrator may not
consolidate more than one person's claims, and may not otherwise
preside over any form of a representative or class proceeding." App.
to Pet. for Cert. 61a.

[fn3] The guaranteed minimum recovery was increased in 2009 to
$10,000. Brief for Petitioner 7.

[fn4] The dissent seeks to fight off even this eminently reasonable
concession. It says that to its knowledge "we have not . . . applied
the Act to strike down a state statute that treats arbitrations on
par with judicial and administrative proceedings,"
post, at 10 (opinion of BREYER, J.), and that "we should think
more than twice before invalidating a state law that . . . puts
agreements to arbitrate and agreements to litigate `upon the same
footing'" post, at 4-5.

[fn5] Relying upon nothing more indicative of congressional
understand ing than statements of witnesses in committee hearings
and a press release of Secretary of Commerce Herbert Hoover, the
dissent suggests that Congress "thought that arbitration would be
used primarily where merchants sought to resolve disputes of fact
. . . [and] possessed roughly equivalent bargaining power."
Post, at 6. Such a limitation appears nowhere in the
text of the FAA and has been explicitly rejected by our cases.
"Relationships between securities dealers and investors, for
example, may involve unequal bargaining power, but we [have] never
theless held . . . that agreements to arbitrate in
that context are enforceable." Gilmer v. Interstate/JohnsonLane Corp., 500 U. S. 20, 33 (1991); see also
id., at 32-33 (allowing arbitration of claims arising under the
Age Discrimination in Employment Act of 1967 despite allegations of
unequal bargaining power between employers and employees). Of course
the dissent's disquisition on legislative history fails to note
that it contains nothing — not even the testimony of a stray witness
in committee hearings — that contemplates the existence of class
arbitration.

[fn6] Of course States remain free to take steps addressing the
concerns that attend contracts of adhesion — for example, requiring
class-action-waiver provisions in adhesive arbitration agreements to
be highlighted. Such steps cannot, however, conflict with the FAA or
frustrate its purpose to ensure that private arbitration agreements
are enforced according to their terms.

[fn7] The dissent claims that class arbitration should be compared
to class litigation, not bilateral arbitration.
Post, at 6-7. Whether arbitrating a class is more desirable
than litigating one, however, is not relevant. A State cannot defend
a rule requiring arbitration-by-jury by saying that parties will
still prefer it to trial-by-jury.

[fn8] The dissent cites three large arbitration awards
(none of which stems from classwide arbitration) as evidence
that parties are willing to submit large claims before an
arbitrator. Post, at 7-8. Those examples might be in point if
it could be established that the size of the arbitral dispute was
predictable when the arbitration agreement was entered. Otherwise,
all the cases prove is that arbitrators can give huge
awards — which we have never doubted. The point is that in
class-action arbitration huge awards (with limited judicial review)
will be entirely predictable, thus rendering arbitration
unattractive. It is not reasonably deniable that requiring consumer
disputes to be arbitrated on a classwide basis will have a
substantial deterrent effect on incentives to arbitrate.

JUSTICE THOMAS, concurring.

Section 2 of the Federal Arbitration Act (FAA) provides that an
arbitration provision "shall be valid, irrevocable, and enforceable,
save upon such grounds as exist at law or in equity for the
revocation of any contract." 9 U.S.C. § 2. The question here is
whether California's Discover Bank rule, see DiscoverBank v. Superior Ct.,
36 Cal. 4th 148, 113 P. 3d 1100 (2005), is a "groun[d] . . . for the
revocation of any contract."

It would be absurd to suggest that § 2 requires only that a
defense apply to "any contract." If § 2 means anything, it is
that courts cannot refuse to enforce arbitration agreements because
of a state public policy against arbitration, even if the policy
nominally applies to "any contract." There must be some additional
limit on the [***12] contract defenses permitted by § 2. Cf.
ante, at 17 (opinion of the Court) (state law may not require
procedures that are "not arbitration as envisioned by the FAA" and
"lac[k] its benefits");
post, at 5 (BREYER, J., dissenting) (state law may require only
procedures that are "consistent with the use of arbitration").

I write separately to explain how I would find that limit in the
FAA's text. As I would read it, the FAA requires that an agreement
to arbitrate be enforced unless a party successfully challenges the
formation of the arbitration
agreement, such as by proving fraud or
duress. 9 U.S.C. §§ 2, 4. Under this reading, I would reverse the
Court of Appeals because a district court cannot follow both the FAA
and the Discover Bank rule, which does not relate to defects in
the making of an agreement.
[*1754]

This reading of the text, however, has not been fully developed by
any party, cf. Brief for Petitioner 41, n. 12, and could benefit
from briefing and argument in an appropriate case. Moreover, I think
that the Court's test will often lead to the same outcome as my
textual interpretation and that, when possible, it is important in
interpreting statutes to give lower courts guidance from a majority
of the Court. See US Airways, Inc. v. Barnett,
535 U. S. 391, 411 (2002) ([**760] O'Connor, J., concurring). Therefore,
although I adhere to my views on purposes-and-objectives
pre-emption, see Wyeth v. Levine,
555 U. S. 555, ___ (2009) (opinion concurring in judgment), I
reluctantly join the Court's opinion.

I

The FAA generally requires courts to enforce arbitration
agreements as written. Section 2 provides that "[a] written
provision in . . . a contract . . . to settle by arbitration a
controversy thereafter arising out of such contract . . . shall be
valid, irrevocable, and enforceable, save upon such grounds as
exist at law or in equity for the revocation of any contract."
Significantly, the statute does not parallel the words "valid,
irrevocable, and enforceable" by referencing the grounds as exist
for the "invalidation, revocation, or nonenforcement" of any
contract. Nor does the statute use a different word or phrase
entirely that might arguably encompass validity, revocability, and
enforce-ability. The use of only "revocation" and the conspicuous
omission of "invalidation" and "nonenforcement" suggest that the
exception does not include all defenses applicable to any contract
but rather some subset of those defenses.
See Duncan v. Walker, 533 U. S. 167, 174 (2001) ("It is
our duty to give effect, if possible, to every clause and word of a
statute" (internal quotation marks omitted)).

Concededly, the difference between revocability, on the one hand,
and validity and enforceability, on the other, is not obvious. The
statute does not define the terms, and their ordinary meanings
arguably overlap. Indeed, this Court and others have referred to the
concepts of revocability, validity, and enforceability
interchangeably. But this ambiguity alone cannot justify ignoring
Congress' clear decision in § 2 to repeat only one of the three
concepts.

To clarify the meaning of § 2, it would be natural to look to
other portions of the FAA. Statutory interpretation focuses on "the
language itself, the specific context [***13] in which that language is
used, and the broader context of the statute as a whole."
Robinson v. Shell Oil Co., 519 U. S. 337, 341 (1997). "A
provision that may seem ambiguous in isolation is often clarified by
the remainder of the statutory scheme . . . because only one of the
permissible meanings produces a substantive effect that is
compatible with the rest of the law." United Sav. Assn. ofTex. v. Timbers of Inwood Forest Associates, Ltd.,
484 U. S. 365, 371 (1988).

Examining the broader statutory scheme, § 4 can be read to clarify
the scope of § 2's exception to the enforcement of arbitration
agreements. When a party seeks to enforce an arbitration agreement
in federal court, § 4 requires that "upon being satisfied that the
making of the agreement for arbitration or the failure to comply
therewith is not in issue," the court must order arbitration "in
accordance with the terms of the agreement."

Reading §§ 2 and 4 harmoniously, the "grounds . . . for the
revocation" preserved in § 2 would mean grounds related to the
[*1755] making of the agreement. This would require enforcement of an
agreement to arbitrate unless a party
successfully asserts a defense concerning the formation of [**761] the
agreement to arbitrate, such as fraud, duress, or mutual mistake.
See Prima Paint Corp. v. Flood & Conklin Mfg. Co.,
388 U. S. 395, 403-404 (1967) (interpreting § 4 to permit federal
courts to adjudicate claims of "fraud in the inducement of the
arbitration clause itself" because such claims "g[o] to the `making'
of the agreement to arbitrate"). Contract defenses unrelated to the
making of the agreement — such as public policy — could not be the
basis for declining to enforce an arbitration clause.[fn*]

II

Under this reading, the question here would be whether
California's Discover Bank rule relates to the making of an
agreement. I think it does not.

In Discover Bank,
36 Cal. 4th 148, 113 P. 3d 1100, the California Supreme Court held
that "class action waivers are, under certain circumstances,
unconscionable as unlawfully exculpatory."
Id., at 65, 113 P. 3d, at 1112; see also
id., at 161, 113 P. 3d, at 1108 ("[C]lass action waivers
[may be] substantively unconscionable inasmuch as they may operate
effectively as exculpatory contract clauses that are contrary to
public policy"). The court concluded that where a class-action
waiver is found in an arbitration agreement in certain consumer
contracts of adhesion, such waivers "should not be enforced."
Id., at 163, 113 P. 3d, at 1110. In practice, the court
explained, such agreements "operate to insulate a party from
liability that otherwise would be imposed under California law."
Id., at 161, 113 P. 3d, at 1108, 1109. The court did not
conclude that a customer would sign such an agreement only if under
[*1756] the influence of fraud, duress, or delusion.

The court's analysis and conclusion that the arbitration agreement
was exculpatory reveals that the Discover [**762] Bank rule does not
concern the making of the arbitration agreement. Exculpatory
contracts are a paradigmatic example of contracts that will not be
enforced because of public policy. 15 G. Giesel, Corbin on
Contracts §§ 85.1, 85.17, 85.18 (rev. ed. 2003). Indeed, the court
explained that it would not enforce the agreements because they are
"`against the policy of the law.'"
36 Cal. 4th, at 161, 113 P. 3d, at 1108 (quoting
Cal. Civ. Code Ann. § 1668); see also
36 Cal. 4th, at 166, 113 P. 3d, at 1112 ("Agreements to arbitrate
may [***14] not be used to harbor terms, conditions and practices
that undermine public policy" (internal quotation marks omitted)).
Refusal to enforce a contract for public-policy reasons does not
concern whether the
contract was properly made.

Accordingly, the Discover Bank rule is not a "groun[d] . . .
for the revocation of any contract" as I would read § 2 of the FAA
in light of § 4. Under this reading, the FAA dictates that the
arbitration agreement here be enforced and the DiscoverBank rule is pre-empted.

[fn*] The interpretation I suggest would be consistent with our
precedent. Contract formation is based on the consent of the
parties, and we have emphasized that "[a]rbitration under the Act is
a matter of consent." Volt Information Sciences, Inc. v.
Board of Trustees of Leland Stanford Junior Univ.,
489 U. S. 468, 479 (1989).

The statement in Perry v. Thomas, 482 U. S. 483 (1987),
suggesting that § 2 preserves all state-law defenses that "arose to
govern issues concerning the validity, revocability, and
enforceability of contracts generally,"
id., at 493, n. 9, is dicta. This statement is found in a
footnote concerning a claim that the Court "decline[d] to address."
Id., at 392, n. 9. Similarly, to the extent that statements in
Rent-A-Center, West, Inc. v. Jackson,
561 U. S. ___, ___ n. 1 (2010) (slip op. at ___, n. 1), can be read
to suggest anything about the scope of state-law defenses
under § 2, those statements are dicta, as well. This Court has never
addressed the question whether the state-law "grounds" referred to
in § 2 are narrower than those applicable to any contract.

Moreover, every specific contract defense that the Court has
acknowledged is applicable under § 2 relates to contract formation.
In Doctor's Associates, Inc. v. Casarotto,
517 U. S. 681, 687 (1996), this Court said that fraud, duress, and
unconscionability "may be applied to invalidate arbitration
agreements without contravening § 2." All three defenses
historically concern the making of an agreement. See MorganStanley Capital Group Inc. v. Public Util. Dist. No. 1 ofSnohomish Cty., 554 U. S. 527, 547 (2008) (describing fraud and
duress as "traditional grounds for the abrogation of [a] contract"
that speak to "unfair dealing at the contract formation stage");
Hume v. United States,
132 U. S. 406, 411, 414 (1889) (describing an unconscionable
contract as one "such as no man in his senses and not under delusion
would make" and suggesting that there may be "contracts so
extortionate and unconscionable on their face as to raise the
presumption of fraud in their inception" (internal quotation marks
omitted)).

The Federal Arbitration Act says that an arbitration agreement
"shall be valid, irrevocable, and enforceable, save upon suchgrounds as exist at law or in equity for the revocation of anycontract." 9 U.S.C. § 2 (emphasis added). California law sets
forth certain circumstances in which "class action waivers" in
any contract are unenforceable. In my view, this rule of
state law is consistent with the federal Act's language and primary
objective. It does not "stan[d] as an obstacle" to the Act's
"accomplishment and execution." Hines v. Davidowitz,
312 U. S. 52, 67 (1941). And the Court is wrong to hold that the
federal Act pre-empts the rule of state law.

I

The California law in question consists of an authoritative
state-court interpretation of two provisions of the California Civil
Code. The first provision makes unlawful all contracts "which have
for their object, directly or in directly, to exempt anyone from
responsibility for his own . . . violation of law."
Cal. Civ. Code Ann. § 1668 (West 1985). The second provision
authorizes courts to "limit the application of any unconscionable
clause" in a contract so "as to avoid any unconscionable
result." § 1670.5(a).

"is found in a consumer contract of adhesion in a
setting in which disputes between the contracting
parties predictably involve small amounts of
damages, and when it is alleged that the party
with the superior bargaining power has carried
out a scheme to deliberately cheat large numbers
of consumers out of individually small sums of
money, then . . . the waiver becomes in practice
the exemption of the party `from responsibility
for [its] own [**763] fraud, or willful injury [*1757] to the
person or property of another.'"
Id., at 162-163, 113 P. 3d, at 1110.

In such a circumstance, the "waivers are unconscionable under
California law and should not be enforced."
Id., at 163, 113 P. 3d, at 1110.

The Discover Bank rule is consistent with the federal Act's
language. It "applies equally to class action litigation waivers in
contracts without arbitration agreements as it does to class
arbitration waivers in contracts with such agreements."
36 Cal. 4th, at 165-166, 113 P. 3d, at 1112. Linguistically
speaking, it falls directly within the scope of the Act's exception
permitting courts to refuse to enforce arbitration agreements on
grounds that exist "for the revocation of any contract."
9 U.S.C. § 2 (emphasis added). The majority agrees.
Ante, at 9.

Congress was fully aware that arbitration [**764] could provide procedural
and cost advantages. The House Report emphasized the
"appropriate[ness]" of making arbitration [*1758] agreements enforceable
"at this time when there is so much agitation against the costliness
and delays of litigation." Id., at 2. And this Court has
acknowledged that parties may enter into arbitration agreements in
order to expedite the resolution of disputes. See Preston v.
Ferrer, 552 U. S. 346, 357 (2008) (discussing "prime objective
of an agreement to arbitrate"). See also Mitsubishi MotorsCorp. v. Soler Chrysler-Plymouth, Inc.,
473 U. S. 614, 628 (1985).

But we have also cautioned against thinking that Congress' primary
objective was to guarantee these particular procedural
advantages. Rather, that primary objective was to secure the
"enforcement" of agreements to arbitrate. Dean Witter,
470 U. S., at 221. See also id., at 219 (we "reject the suggestion
that the overriding goal of the Arbitration Act was to promote the
expeditious resolution of claims");
id., at 219, 217-218 ("[T]he intent of Congress" requires us to
apply the terms of the Act without regard to whether the result
would be "possibly inefficient"); cf.
id., at 220 (acknowledging that "expedited [***16] resolution of
disputes" might lead parties to prefer arbitration). The relevant
Senate Report points to the Act's basic purpose when it says
that "[t]he purpose of the [Act] is clearly set forthin section 2," S. Rep. No. 536, at 2 (emphasis added), namely,
the section that says that an arbitration agreement "shall be valid,
irrevocable, and enforceable, save
upon such grounds as exist at law or in equity for the revocation of
any contract," 9 U.S.C. § 2.

Thus, insofar as we seek to implement Congress' intent, we should
think more than twice before invalidating a state law that does just
what § 2 requires, namely, puts agreements to arbitrate and
agreements to litigate "upon the same footing."

III

The majority's contrary view (that Discover Bank stands as an
"obstacle" to the accomplishment of the federal law's objective,
ante, at 9-18) rests primarily upon its claims that the
Discover Bank rule increases the complexity of arbitration
procedures, thereby discouraging parties from entering into
arbitration agreements, and to that extent discriminating in
practice against arbitration. These claims are not well founded.

For one thing, a state rule of law that would sometimes set aside
as unconscionable a contract term that forbids class arbitration is
not (as the majority claims) like a rule that would require
"ultimate disposition by a jury" or "judicially monitored discovery"
or use of "the Federal Rules of Evidence." Ante, at 8, 9.
Unlike the majority's examples, class arbitration is consistent with
the use of arbitration. It is a form of arbitration that is well
known in California and followed elsewhere. See, e.g.,Keating v. Superior Ct., 167 Cal. Rptr. 481, 492 (App. 1980)
(officially de-published); American Arbitration Association (AAA),
Supplementary Rules for Class Arbitrations (2003),
http://www.adr.org/sp.asp?id=21936 (as visited Apr. 25, 2011, and
available in [**765] Clerk of Court's case file); JAMS, The Resolution
Experts, Class Action Procedures (2009). Indeed, the AAA has told us
that it has found class arbitration to be "a fair, balanced, and
efficient means of resolving class disputes." Brief for AAA as
Amicus Curiae in Stolt-Nielsen S. A. v. AnimalFeedsInt'l Corp., O. T. 2009,
No. 08-1198, p. 25 (hereinafter AAA Amicus Brief). And unlike
the majority's examples, the Discover Bank rule imposes
equivalent limitations on litigation; hence it cannot [*1759] fairly be
characterized as a targeted attack on arbitration.

Where does the majority get its contrary
idea — that individual, rather than class, arbitration is a
"fundamental attribut[e]" of arbitration? Ante, at 9. The
majority does not explain. And it is unlikely to be able to trace
its present view to the history of the arbitration statute itself.

When Congress enacted the Act, arbitration procedures had not yet
been fully developed. Insofar as Congress considered detailed forms
of arbitration at all, it may well have thought that arbitration
would be used primarily where merchants sought to resolve disputes
of fact, not law, under the customs of their industries, where the
parties possessed roughly equivalent bargaining power. See
Mitsubishi Motors,
supra, at 646 (Stevens, J., dissenting); Joint Hearings
on [***17] S. 1005 and H. R. 646 before the Subcommittees of the Committees
on the Judiciary, 68th Cong., 1st Sess., 15 (1924); Hearing
on S. 4213 and S. 4214 before a Subcommittee of the Senate Committee
on the Judiciary, 67th Cong., 4th Sess., 9-10 (1923); Dept. of
Commerce, Secretary Hoover Favors Arbitration — Press Release
(Dec. 28, 1925), Herbert Hoover Papers — Articles, Addresses, and
Public Statements File — No. 536, p. 2 (Herbert Hoover Presidential
Library); Cohen & Dayton, The New Federal Arbitration Law,
12 Va. L. Rev. 265, 281 (1926); AAA, Year Book on Commercial
Arbitration in the United States (1927). This last mentioned feature
of the history — roughly equivalent bargaining
power — suggests, if anything, that California's statute is
consistent with, and indeed may help to further, the objectives
that Congress had in mind.

Regardless, if neither the history nor present practice suggests
that class arbitration is fundamentally incompatible
with arbitration itself, then on what basis can the majority hold
California's law pre-empted?

For another thing, the majority's argument that the DiscoverBank rule will discourage arbitration rests critically upon the
wrong comparison. The majority compares the complexity of class
arbitration with that of bilateral arbitration. See
ante, at 14. And it finds the former more complex. See
ibid. But, if incentives are at issue, the relevant
comparison is not "arbitration with arbitration" but a comparison
between class arbitration and judicial class actions. After all, in
respect to the relevant set of contracts, the DiscoverBank rule similarly and equally sets aside clauses that forbid
class procedures — whether arbitration procedures or ordinary
judicial procedures are at issue.

Why would a typical defendant (say, a business) prefer a judicial
class action to class arbitration? AAA statistics "suggest
that class arbitration proceedings take more time than the average
commercial arbitration, but [**766] may take less time than the average
class action in court." AAA Amicus Brief 24 (emphasis added).
Data from California courts confirm that class arbitrations can take
considerably less time than in-court proceedings in which class
certification is sought. Compare ante, at 14 (providing
statistics for class arbitration), with Judicial Council of
California, Administrative Office of the Courts, Class Certification
in California: Second Interim Report from the Study
of California Class Action Litigation 18 (2010) (providing
statistics for class-action litigation in California courts). And a
single class proceeding is surely more efficient than thousands of
separate proceedings for identical claims. Thus, if speedy
resolution of disputes were all that mattered, then the DiscoverBank rule would reinforce, [*1760] not obstruct, that objective of the
Act.

Further, even though contract defenses, e.g., duress and
unconscionability, slow down the dispute resolution process, federal
arbitration law normally leaves such matters to the States.
Rent-A-Center, West, Inc. v. Jackson,
561 U. S. ___, ___ (2010) (slip op., at 4) (arbitration agreements
"may be invalidated by `generally applicable contract defenses'"
(quoting Doctor's Associates, Inc. v. Casarotto,
517 U. S. 681, 687 (1996))). A provision in a contract of adhesion
(for example, requiring a consumer to decide very quickly whether to
pursue a claim) might increase the speed and efficiency of
arbitrating a dispute, but the State can forbid it. See, e.g.,Hayes v. Oakridge Home,
122 Ohio St. 3d 63, 67, 2009-Ohio-2054, ¶ 19,
908 N. E. 2d 408, 412 ("Unconscionability
is a ground for revocation of an arbitration agreement"); In rePoly-America, L. P., 262 S. W. 3d 337, 348 (Tex. 2008)
("Unconscionable contracts, however — whether relating to
arbitration or not — are unenforceable under Texas law"). The
Discover Bank rule amounts to a variation on this
theme. California is free to define unconscionability as it sees
fit, and its common law is of no federal concern so long as the
State does not adopt
a special rule that disfavors arbitration. Cf. Doctor'sAssociates, supra, at 687. See also ante, at 4, n.
(THOMAS, J., concurring) (suggesting that, under certain
circumstances, California might remain free to apply its
unconscionability doctrine).

Because California applies the same legal principles to address
the [**767] unconscionability of class arbitration waivers as it does to
address the unconscionability of any other contractual provision,
the merits of class proceedings should not factor into our decision.
If California had applied its law of duress to void an arbitration
agreement, would it matter if the procedures in the coerced
agreement were efficient?

Regardless, the majority highlights the disadvantages of class
arbitrations, as it sees them. See
ante, at 15-16 (referring to the "greatly increase[d] risks to
defendants"; the "chance of a devastating loss" pressuring
defendants "into settling questionable claims"). But class
proceedings have countervailing advantages. In general agreements
that forbid the consolidation of claims can lead small-dollar
claimants to abandon their claims rather than to litigate. I suspect
that it is true even here, for as the Court of Appeals
recognized, AT&T can avoid the $7,500 payout (the payout
that supposedly makes the Concep-cions' arbitration worthwhile)
simply by paying the claim's face value, such that "the maximum gain
to a customer for the hassle [***19] of arbitrating a $30.22 dispute is
still just $30.22." Laster v. AT&T Mobility LLC[*1761],
584 F. 3d 849, 855, 856 (CA9 2009).

What rational lawyer would have signed on to represent the
Concepcions in litigation for the possibility of fees stemming from
a $30.22 claim? See, e.g., Carnegie v. Household Int'l,Inc., 376 F. 3d 656, 661 (CA7 2004) ("The realistic
alternative to a class action is not 17 million individual suits,
but zero individual suits, as only a lunatic or a fanatic sues for
$30"). In California's perfectly
rational view, nonclass arbitration over such sums will also
sometimes have the effect of depriving claimants of their claims
(say, for example, where claiming the $30.22 were to involve filling
out many forms that require technical legal knowledge or
waiting at great length while a call is placed on hold).
Discover Bank sets forth circumstances in which
the California courts believe that the terms of consumer contracts
can be manipulated to insulate an agreement's author from liability
for its own frauds by "deliberately cheat[ing] large numbers of
consumers out of individually small sums of money."
36 Cal. 4th, at 162-163, 113 P. 3d, at 1110. Why is this kind of
decision — weighing the pros and cons of all class proceedings
alike — not California's to make?

Finally, the majority can find no meaningful support for its views
in this Court's precedent. The federal Act has been in force for
nearly a century. We have decided dozens of cases about its
requirements. We have reached results that authorize complex
arbitration procedures. E.g., Mitsubishi Motors,
473 U. S., at 629 (antitrust claims arising in international transaction
are arbitrable). We have upheld nondiscriminatory state
laws that slow down arbitration proceedings. E.g., VoltInformation Sciences,
489 U. S., at 477-479 (California law staying arbitration proceedings until
completion of related litigation is not pre-empted). But we have
not, to my knowledge, applied the Act to strike down a state statute
that treats arbitrations on par with judicial
and administrative proceedings. Cf. Preston,
552 U. S., at 355-356 (Act pre-empts state law that vests primary
jurisdiction in state administrative board).
[**768]

At the same time, we have repeatedly referred to the Act's basic
objective as assuring that courts treat arbitration agreements "like
all other contracts." Buckeye Check Cashing, Inc. v.
Cardegna, 546 U. S. 440, 447 (2006). See also, e.g.,Vaden v. Discover Bank, 556 U. S. ___, ___ (2009);
(slip op., at 13); Doctor's Associates, supra, at 687;
Allied-Bruce Terminix Cos. v. Dobson,
513 U. S. 265, 281 (1995); Rodriguez de-Quijas v.
Shearson/American Express, Inc., 490 U. S. 477, 483-484 (1989);
Perry v. Thomas, 482 U. S. 483, 492-493, n. 9 (1987);
Mitsubishi Motors, supra, at 627. And we have recognized
that "[t]o immunize an arbitration agreement from judicial
challenge" on grounds applicable to all other contracts "would be to
elevate it over other forms of contract." Prima Paint Corp. v.
Flood & Conklin Mfg. Co., 388 U. S. 395, 404, n. 12 (1967); see
also Marchant v. Mead-Morrison Mfg. Co.,
252 N. Y. 284, 299, 169 N. E. 386, 391 (1929) (Car-dozo, C. J.)
("Courts are not at liberty to shirk the process of [contractual]
construction under the empire of a belief that arbitration is
beneficent any more than they may shirk it if their belief happens
to be the contrary"); Cohen & Dayton, 12 Va. L. Rev., at 276 (the
Act "is no infringement upon the right of each State to decide for
itself [***20] what [*1762] contracts shall or shall not exist under its laws").

These cases do not concern the merits and demerits of class
actions; they concern equal treatment of arbitration contracts and
other contracts. Since it is the latter question that is at issue
here, I am not surprised that the majority can find no meaningful
precedent supporting its decision.

IV

By using the words "save upon such grounds as exist at law or in
equity for the revocation of any contract," Congress retained for
the States an important role incident to agreements to
arbitrate. 9 U.S.C. § 2. Through those words Congress reiterated a
basic federal idea that has long informed the nature of this
Nation's laws. We have often expressed this idea in opinions
that set forth presumptions. See, e.g., Medtronic, Inc. v.
Lohr, 518 U. S. 470, 485 (1996) ("[B]ecause the States are
independent
sovereigns in our federal system, we have long presumed
that Congress does not cavalierly pre-empt state-law causes of
action"). But federalism is as much a question of deeds as words. It
often takes the form of a concrete decision by this Court
that respects the legitimacy of a State's action in an individual
case. Here, recognition of that federalist ideal, embodied in
specific language in this particular statute, should lead us to
uphold California's law, not to strike it down. We do not honor
federalist principles in their breach.